Corus Bank ordered to submit capital plan

Corus Bankshares, which has warned it could be placed into receivership, has now been given until Friday to submit a capital restoration plan to federal regulators.

The Chicago-based bank holding company (NASDAQ: CORS) disclosed the May 1 order in its first quarter report, filed on Monday with the Securities and Exchange Commission, in which it said it lost $285 million.

The news should come as no surprise, given that Corus Bank also disclosed in the report that just one of its condo development loans in South Florida is not at risk of foreclosure.

Content Continues Below

If the bank does wind up in receivership, the Federal Deposit Insurance Corp. could put more than $1 billion in loans to South Florida projects on the market.

This is not the first time federal regulators have come down on Corus.In February, they placed restrictions on management and ordered the bank holding company to raise its capital level by June 18. That deadline still stands.

In the May 1 order, additional restrictions were placed on management.

The order also limits the interest rates Corus Bank can offer on deposits to no more than 0.75 of a percent above the national average.

Since the bank attracts most of its deposits through high-rate certificates of deposit via the Internet, this could cause a liquidity problem for Corus Bank, said Philip van Doorn, a senior banking analyst at The Street.com Ratings in Jupiter.

Based on the average deposit return rates contained in a database of 5,000 banks on Tuesday, van Doorn said Corus Bank offered the highest CD return rate in the nation.

If regulators force it to lower its rates, depositors could flee when their terms expire, he said.

Corus Bank said it has hired an investment bank to explore ways to raise capital, but it warned shareholders it might not be successful.

???Any material failure to comply with the provisions of the regulatory agreements could result in further enforcement actions by both the Federal Reserve Board and the Office of the Comptroller of the Currency, or the placing of the bank into conservatorship or receivership,??? Corus wrote in its quarterly report.

Van Doorn said Corus??? prospects for raising capital and avoiding receivership appear dim. He cited its $6.4 million loss on net interest ??? essentially negative revenue for a bank. That means Corus paid out more to depositors in the first quarter than it received in interest from its loans.

The bank missed out on $38 million in interest payments in the first quarter because of its $2.04 billion in nonperforming loans, which represented 49 percent of Corus??? total loans.

A Corus spokeswoman did not immediately return a call seeking comment.

Corus President and CEO Robert J. Glickman and Chairman Joseph C. Glickman resigned in April, although the latter continues to collect lifetime annual compensation of $59,000.

The bank???s condo construction-intensive strategy made it a major financer of South Florida???s building boom ??? and it is suffering as a result.

Corus Bank had 14 condo construction loans and two apartment loans with a $1.03 billion balance as of March 31. Of those, 12 condo loans and both apartment loans with balances and commitments of $955 million were nonperforming. In addition, one more South Florida condo loan valued at $49 million was classified as a potential problem loan, which mean Corus expects to record a loss on the project.

That means only one Corus development loan in South Florida, valued at $28 million, was in good standing as of March 31. It is not clear which project it is for, but it has been completed.

Corus-financed projects in South Florida account for 2,350 completed units, which have had 737 closings as of March 31, and an additional 1,334 units under construction, according to the company???s SEC filing.

There have been significant construction cost overruns at some of the bank???s South Florida projects. Six nonperforming South Florida loans with balances of $216 million have rung up $56 million in cost overruns that Corus funded to keep work going. That???s much higher than the national cost overrun rate the bank has experienced.

Corus valued its one repossessed condo in South Florida, the Tao in Sunrise, at $73.2 million on March 31, down from $80.9 million at year-end. It has sold nine of the 369 units there, according to the company???s SEC filing.

Corus said it was in the process of seeking foreclosure against three South Florida projects with $164.9 million in loans and 569 units as of March 31.

The bank has since filed a foreclosure lawsuit in Miami-Dade County Circuit Court against the developer of the 118-unit Onyx on the Bay condo, which has 41 unsold units. The original loan was for $44.1 million.

Other major Corus-financed projects in South Florida include:

• Jade Ocean Condominiums in Sunny Isles Beach
• Paramount Bay in Miami
• The Mint at Riverfront in Miami
• Trump International Hotel and Tower in Fort Lauderdale
• Caribbean Miami Beach
• Infinity at Brickell in Miami
• The Ivy in Miami

Van Doorn said there would be a lot of vulture investor interest in Corus??? South Florida condo loans because of the high quality of the projects, but they probably won???t be discounted enough for buyers unless the bank falls into federal receivership.

???I don???t see how Corus will get out of it,??? he said.